Growth on Pacific routes might possibly take a bit of a hit.
I wonder whether this will have any effect on medium to longer term fleet plans and therefore pilot recruitment numbers?
Nocookies | The Australian
Qantas’s plans to dominate the skies over the Pacific have been left in tatters and its popular routes into San Francisco and Dallas placed under review after the Australian carrier and American Airlines ditched plans to expand their partnership.
The airlines yesterday dumped plans to expand their alliance after the US Department of Transport tentatively blocked the deal and rejected pleas from Qantas and American for an extended deadline to appeal the decision. The DoT said their arguments were “unpersuasive”.
“This is an extremely disappointing sequence of events for Qantas and American Airlines, as well as for customers, and ultimately for trade between the United States and Australia,” Qantas said yesterday as it revealed it would no longer appeal the DoT’s decision.
The airlines, which already codeshare and offer frequent-flyer reciprocity with each other, had hoped to win antitrust immunity from the DoT to deepen and expand the relationship into a revenue-sharing joint venture.
But the DoT blocked the deal because it would reduce competition by allowing Qantas and American to control about 60 per cent of airfares between the US and Australia.
The rejection means Qantas will now review its direct flights into San Francisco and Dallas, which were launched last year in anticipation of the expanded alliance going ahead.
American also launched flights ahead of the expanded partnership — from Los Angeles to Sydney and Los Angeles to Auckland — but it’s understood they will remain in place.
“Both American and Qantas made it quite clear at the time of announcement of the proposed expanded alliance back in June 2015 that a number of services were only made economically possible as a result of the joint business agreement,” said JPMorgan analyst Guy Bunce.
“As a consequence, if this is no longer possible then the following services could be at risk of reduction and/or cessation including: Sydney-San Francisco, American’s Sydney-LA, and maybe even Qantas’s Sydney-Dallas.”
Mr Bunce said the decision to reject the new alliance was likely to be immaterial for Qantas’s earnings in the short term but it could have wider implications for the airline’s international business and its ability to grow its bottom line. Qantas had expected to grow its trans-Pacific traffic (which accounts for 40 per cent of its international revenue) by 9 per cent through the new deal.
“This decision could impact the long-term profitability of Qantas’s most important international market, but we feel the current share price already reflects significant earnings risk,” Mr Bunce said.
With the deal now dead, Qantas and American said they would be “severely limited” in their ability to work together to grow on the trans-Pacific routes. “As a consequence, each airline will need to assess their trans-Pacific networks,” the airlines said.
“Qantas and American Airlines will now separately assess their positions before deciding on next steps. Both carriers are committed to finding ways to work together more closely to deliver benefits to customers that neither could offer alone.” American Airlines said it was “very disappointed” with the DoT’s decision.
PG